Can a foreign director attend our board meeting by video?

You are setting up an Indian company. One of your directors lives in Dubai, Singapore, London or the United States. Flying that person in for every board meeting is a cost you would rather avoid. So the question is simple. Can the director just join on video?

Yes. The Companies Act 2013 allows it, and it goes further: a director on video counts towards the quorum. But the video route sits inside a few fixed rules of the Act. Your board still needs one director who spends enough time in India, the meeting calendar does not relax, and the tool you use has to do specific things. This article walks through what the Act itself says, in the order a founder meets each point.

Your situation: a director who is not in India

A company's board is the group of directors who run it. A private company needs at least two directors, a public company at least three, and a One Person Company one (s.149(1), Companies Act 2013). Nothing in the Act says every director must live in India.

There is one residence rule. Every company must have at least one director who stays in India for a total period of not less than 182 days during the financial year (s.149(3), Companies Act 2013). For a newly incorporated company the requirement applies proportionately at the end of the financial year in which it is incorporated (proviso to s.149(3), Companies Act 2013).

A worked example. Suppose you incorporate a private company with two directors, and both plan to live abroad. That board cannot meet the 182-day test. At least one director must be the person who is in India for the required period. A foreign director on video is fine. A board made up entirely of people who spend most of the year outside India is not.

The test is about days stayed in India, not about passport or citizenship. If you are the founder who will be in India, check your travel plan against the 182 days before you name yourself as the director who meets it.

What you can do today: video participation is allowed

The law sits in section 173(2). Participation of directors in a board meeting may be either in person or through video conferencing or other audio visual means, as may be prescribed, "which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time" (s.173(2), Companies Act 2013).

In plain words, a video call is acceptable only if the tool does three things:

• It lets you recognise who is taking part and records that they took part.
• It records the proceedings.
• It stores the recording together with the date and time.

An ordinary phone call does not do this. A video platform with recording switched on does. Check the recording setting before the meeting, not after. If you are scheduling across time zones, remember that the date and time stored with the recording are part of what the Act asks the facility to hold, so confirm which clock your platform stamps on it.

The Act says the facility is "as may be prescribed". The detailed procedure for running a video meeting is left to rules made under section 173. This article covers what the Act itself requires.

A director on video counts towards quorum

Quorum is the minimum number of directors who must take part for the meeting to be valid. For a board meeting it is one-third of the board's total strength or two directors, whichever is higher. The same sub-section says the participation of directors by video conferencing or other audio visual means is counted for the purposes of quorum (s.174(1), Companies Act 2013).

Two points of arithmetic come from the Act's own explanation. Any fraction of a number is rounded off as one. And "total strength" does not include directors whose places are vacant (Explanation to s.174, Companies Act 2013). So:

• A board of two directors: one-third is under one, so the quorum is two, the higher figure. Both directors must take part. If one is your Dubai director, that director on video is one of the two.
• A board of three directors: one-third is one, so the quorum is two.
• A board of seven directors: one-third is 2.33, which rounds to three. Three is higher than two, so the quorum is three.

So your overseas director is not just a spectator. On a two-director board, that director's connection is the difference between a valid meeting and none.

If the call drops and quorum fails

If a meeting cannot be held for want of quorum, then unless the articles of the company say otherwise, it automatically stands adjourned to the same day, at the same time and place, in the next week. If that day is a national holiday, it stands adjourned to the next day that is not a national holiday, at the same time and place (s.174(4), Companies Act 2013).

This matters for a small board. If your Indian director is in the room and the overseas director cannot connect, the meeting has no quorum on a two-director board. Plan a second connection route in case the first fails.

If vacancies shrink the board below quorum, the continuing directors may act only to bring the board back up to the number needed for quorum, or to summon a general meeting, and for no other purpose (s.174(2), Companies Act 2013).

Matters the Central Government can restrict

The Act lets the Central Government, by notification, specify matters that cannot be dealt with in a meeting held through video conferencing or other audio visual means (first proviso to s.173(2), Companies Act 2013). The Act then adds a second proviso: where there is quorum in the meeting through physical presence of directors, any other director may participate by video even on those restricted matters (second proviso to s.173(2), Companies Act 2013).

That second proviso is the practical point for a foreign director. If enough directors are physically in the room to form the quorum, your overseas director can still join by video on a matter the Government has restricted. If your board is two directors and the quorum is two, it follows that both would need to be physically present before the second proviso helps. On a larger board, enough directors in India can carry the quorum.

The list of restricted matters is set by notification, not by the Act. When you plan an agenda, check each item against the matters currently notified under the first proviso, and where an item is on that list, make sure the quorum is physically present.

The clock: dates and gaps that still apply

A video link does not change the schedule. These timings apply whether directors attend in person or by video:

• The first board meeting must be held within thirty days of the date of incorporation (s.173(1), Companies Act 2013).
• After that, the board must hold at least four meetings every year, with not more than one hundred and twenty days between two consecutive meetings (s.173(1), Companies Act 2013).
• A One Person Company, small company or dormant company is deemed to comply if at least one board meeting is held in each half of a calendar year, with a gap of not less than ninety days between the two meetings (s.173(5), Companies Act 2013).
• Sections 173 and 174 do not apply to a One Person Company that has only one director on its board (proviso to s.173(5), Companies Act 2013).
• The Central Government may, by notification, direct that the four-meeting rule does not apply to a class of companies or applies with exceptions (proviso to s.173(1), Companies Act 2013).

Notice to a director who lives abroad

A board meeting is called by giving not less than seven days' notice in writing to every director at the address registered with the company. The notice must be sent by hand delivery, by post or by electronic means (s.173(3), Companies Act 2013). For a director abroad, electronic notice is the practical route, and the address on record for that director is the address the Act looks to.

A meeting can be called at shorter notice to transact urgent business, but only on the condition that at least one independent director, if any, is present at the meeting. If no independent director is present, the decisions taken must be circulated to all directors and become final only when at least one independent director, if any, ratifies them (provisos to s.173(3), Companies Act 2013). A new startup board rarely has an independent director, so plan on the seven days.

Another option: a resolution by circulation

Routine approvals need not go to a meeting. A resolution can be passed by circulation if it has been circulated in draft, with the necessary papers, to all directors at their addresses registered with the company in India, by hand delivery, post or courier or through electronic means as may be prescribed, and is approved by a majority of the directors entitled to vote (s.175(1), Companies Act 2013).

If directors forming at least one-third of the total number of directors require that the resolution be decided at a meeting, the chairperson must put it to a meeting of the Board (proviso to s.175(1), Companies Act 2013). A circulated resolution is also noted at a subsequent meeting of the Board and made part of its minutes (s.175(2), Companies Act 2013).

Note the phrase "addresses registered with the company in India" in section 175(1). For a director who lives abroad, check the address recorded for circulation purposes before you rely on this route.

What not to do

• Do not rely on a phone call or a chat thread as attendance. The Act wants a facility that can record and recognise participation and store the proceedings with date and time (s.173(2), Companies Act 2013).
• Do not build a board with no director who meets the 182-day test. All directors abroad fails s.149(3), Companies Act 2013.
• Do not let the gap slip. More than one hundred and twenty days between two board meetings breaches s.173(1), Companies Act 2013, even if every meeting was on video.
• Do not treat a dropped connection as a quorum. A director who is not connected at the time is not counted. The meeting stands adjourned under s.174(4), Companies Act 2013.
• Do not put a notified restricted matter to a meeting where the physical quorum is missing. The second proviso to s.173(2) helps only where quorum is present through physical presence.

What happens if you get it wrong

If an officer whose duty is to give notice of a board meeting fails to do so, that officer is liable to a penalty of ₹25,000 (s.173(4), Companies Act 2013).

If the company has no director who meets the 182-day test, section 149(3) is in default. Section 172 provides for defaults in Chapter XI of the Act where no specific penalty is given: the company and every officer in default are liable to a penalty of ₹50,000, with a further ₹500 for each day the failure continues, subject to a maximum of ₹3 lakh for the company and ₹1 lakh for an officer in default (s.172, Companies Act 2013).

What to do now

• Next step: Name the director who will meet the 182-day test in India, then choose a video tool that records and stores the meeting with date and time, and test it with your overseas director (s.149(3) and s.173(2), Companies Act 2013).
• Deadline: Hold the first board meeting within thirty days of incorporation, and plan at least four meetings a year with no more than one hundred and twenty days between any two (s.173(1), Companies Act 2013). Give at least seven days' notice (s.173(3), Companies Act 2013).
• Consequence of missing it: A failure to give notice carries a penalty of ₹25,000 on the officer responsible (s.173(4), Companies Act 2013). A board with no director meeting the 182-day test is a default for which s.172 provides a penalty of ₹50,000 plus ₹500 a day (s.172, Companies Act 2013).

Have a CA review your facts before you act or file.

FAQs

Can all of my directors be outside India?
They can attend a meeting from outside India by video. But the company must have at least one director who stays in India for a total of not less than 182 days in the financial year (s.149(3), Companies Act 2013). So at least one director must meet that test.

Does a director on video count for quorum?
Yes. Participation by video conferencing or other audio visual means is counted for quorum (s.174(1), Companies Act 2013). On a two-director board, the quorum is two, so both directors must take part.

Can my overseas director join on a matter the Government has restricted for video meetings?
The Act says yes where there is quorum in the meeting through physical presence of directors. Then any other director may participate by video (second proviso to s.173(2), Companies Act 2013).

How many board meetings must a new private company hold?
The first within thirty days of incorporation, then at least four a year with no more than one hundred and twenty days between two consecutive meetings (s.173(1), Companies Act 2013). A small company, One Person Company or dormant company can instead meet once in each half of a calendar year with a gap of at least ninety days (s.173(5), Companies Act 2013).

What if the meeting cannot be held for want of quorum?
Unless the articles say otherwise, it stands adjourned to the same day, time and place in the next week, or the next day that is not a national holiday if that day is one (s.174(4), Companies Act 2013).

Can we pass the decision by circulation instead?
Often, yes. A resolution circulated in draft with the papers can be passed by a majority of the directors entitled to vote. If one-third of the directors ask for a meeting, it must go to a meeting (s.175(1), Companies Act 2013).

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See Also

• Foreign national as first director: DIN and DSC steps
• Converting our LLP into a private limited company
• Startup India (DPIIT) recognition rejected — what to fix and reapply